Jordan Times
Tuesday, October 27, 1998
'Southern Bell quits race to hold 40% equity in
JTC'
By Ghadeer Taher
AMMAN — Southern Bell Corporation, one of two companies vying for a 40 per cent equity stake in the Jordan Telecommunications Corporation (JTC), has pulled out of the race, informed sources said Monday.
According to the sources, the American communications company, Southern Bell, notified Merryll Lynch, the American firm acting as financial advisor to the controversial sale, that it was no longer interested in submitting a final offer.
The minister of post and telecommunications as well as other officials refused to comment on the pullout and what course of action the government would now take as a result.
Southern Bell's decision now leaves British Cable and Wireless as the sole contender for the stake unless the government decides to reissue the tender. But such a move, industry sources say, will further put into question the country's privatisation programme, already marred by protracted political infighting about the merits and mechanism of selling state assets, especially to a strategic partner.
“The government will now be comparing apples to nothing in the eyes of most Jordanians...it will be harder to sell the idea to them even if we get a good deal,” said one politician. “At the same time the government has to proceed with the sale if it gets the right price from Cable and Wireless to salvage our international reputation,” he said, adding that if the deal fails to go through, potential foreign investors may shy away from the Kingdom.
The government last month asked the two companies, which had already submitted their indicative prices, to make their final offers by year end.
Speculating on the reasons behind Southern Bell's decision, industry sources cited the government's new terms to its original information memorandum coupled with a sluggish international market.
One of the memorandum changes calls for a review of the executive board, which has a four to three representation in favour of the strategic partner, when the telecommunication firm's exclusivity period runs out in the year 2002.
At the time, investment bankers and some officials said such terms could be discouraging to both firms as they prepare their final price bids.
Southern Bell's move is likely to fuel an already fiery political debate between the government, pushing for a strategic partner, on the one hand and Ali Shukri, the telecommunication company's new chairman, opposed to such a partnership. A majority of lawmakers, fearing the government is relinquishing state assets to foreigners, also reject a strategic partner.
The government is pushing for the strategic partnership on the grounds that it would allow a transfer of modern technology along with a business plan that would move it smoothly into the post 2002 era when its monopoly ends.
On Friday, the government successfully concluded a prize deal to sell a 33 per cent equity stake in the blue-chip Jordan Cement Factories Company, the other jewel in its privatisation programme, to French cement giant Lafarge.
The government, which owns 49.3 per cent of the country's sole cement producer, initialled an agreement with Lafarge to sell 20 million of its shares to the French firm at JD3.6 a share.
“The government must understand that there is a window of opportunity,” said an international investment banker. “If you wait too long, it may close and potential investors will pack their bags and head for other markets,” he said.